>> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew is off today. let's start off with this week's economic calendar. we have big numbers. today pending home sales and the dallas fed survey. tomorrow, the fed begins a two-day policy setting meeting with a decision announcement that is expected on wednesday. also tomorrow, the s&p case schiller home price index, consumer confidence and housing vacancies. on wednesday, in addition to that fomc statement, we'll be paying attention to adp employment report and the advance reading of second quarter gdp. a lot of economists expect gdp to come in less than 1%, but the government will also issue a special release of revisions going back to 1929. so that could make the economy look slightly better. government hasn't issued major revisions since 2009. then on thursday we get the weekly jobless claims, manufacturing pmi, ism manufacturing, construction

spending, and auto sales. and then finally on friday, we get that big july nonfarm payrolls report. economists are looking for about 184,000 jobs to have been added for the month. meantime, the unemployment rate is expected to fall to 7.5%. but joe, it's going to be really interesting watching a lousy gdp number, probably a good jobs number and seeing how the ten-year reacts to each of those numbers. >> how do we know about the jobs number? we're ready for a bad one. you think it will be good because of the claims numbers? >> i don't know. >> i don't know either. we're ready for either. >> how the bond market reacts to good news/bad news potentially. >> and the fed's going to be in focus this week. >> yep. talking about the fed? >> so sick -- well, if it's not humphrey hawkins, a two-day bernanke thing, now it's the fom. i don't remember in my life being so controlled by any every fed decision. then the minutes release later of what they said. it's constant. and there's such a big part of our life. i think it's a sad commentary on

how much of the economy at this point is controlled. and i guess it is important who we pick. >> it's huge. >> you see who "the journal" has on both sides of the editorial page, they've got something that you kind of cringed when i said it, but it's all framed in gender wars. christine roamer says if it's not yellen. and then larry summers that made the comments at harvard supposedly. that inflamed women. it's all framed. if obama does not pick a woman, then it's going to be a huge, you know, problem for the left. then alan blinder. you know who his pick is. >> who? >> well, it totally cements my position as a huge larry summers backer. oh, my god. "the journal" points out that never has she said anything in her entire time that would cause you to believe she'd ever pull the punch away from the punch bowl. whereas blinder says every decision she's ever made has been great which shows you where they're coming from. >> the front page, on the front

page of "the journal" laid out a study where they looked at all of the fed officials to see who's been more right about the economy at this point. you can say the people who have been dovish have been right because maybe they're always dovish and maybe things have gone their way and they didn't predict things like tsunamis. the hawks fared much worse than the doves did, if you've been looking since 2009. >> right. since 2009. >> it was a study done from 2009. >> all in the face of, you know, an activist government that some still blame for the sluggishness, which, you know, we'll see. i don't know. i mean, it is bad that the fed's such a big part of our lives. and we're at 7.5% unemployment. >> i would bet just about any investor would want to look at the fed more than just about any other piece of economic information. >> right. earnings are good, though. >> i like how you pointed out the glass half full. >> well, we've reported half which means half are left, right? >> that's right.

yea. we still have more to go. >> about one-fifth of the s&p 500 companies are due to report this week. among the sectors in focus, bp, exxon and chevron all post reports. of the companies that have reported so far, 68% have beaten earnings estimates. meantime, 56% have topped revenue forecasts. and we're going to talk to someone who's kind of like an outlier on earnings. agreeing with jim cramer in a couple of minutes because his point is that, yeah, everyone did lower a little bit, but the numbers are so big that even if they hadn't lowered expectations, they would have still beat. and same with revenues. he says it's been a great -- >> yeah, and bernstein pointed out that you haven't seen as many negative surprises. >> sanford or richard bernstein? because they're both about -- you say bernstein, it could be either one. it could be the large firm which takes hundreds of people just to match the opinion of one richard

bernstein. we also have a few deals to start this week. the big one from the weekend is the global ad agencies. publicis and omnicom reporting. it's billed as a merger of equals. >> i like that quote. i don't think it can go much lower, to be honest with you. i mean, if it goes any lower -- >> obviously. >> it's down 100%. >> this deal could bring rival accounts such as coke and pepsi under one firm. antitrust review is needed in about 45 countries. the ceos of the two companies pledged to handle concerns from major clients. >> what's good in this operation is that we are both entering into negotiations from a position of strength. there is no one weak partner. and there is no one who has financial difficulties or anything like. so we believe that this will be a great operation for all our

people, our clients and our shareholders. >> it's going to be delicate in its execution, but the sooner we get on to it, the better off we're going to be. >> both those ceos will join us at 10:10 eastern this morning. also in the pharma space, perego is buying ilan for $8.6 billion in cash and stock. that deal is valued at $6.25 a share in cash plus another $10.25 in stock. and a third deal not yet announced, brian sullivan reports that sax will be acquired by lord's. the deal was signed yesterday and is valued at $16 a share. an announcement is expected this morning. >> i was hoping stern would buy. >> i was, too.

only because -- >> who knows? it's not like he'd ever give us a tie. >> i like the one you're wearing. >> you do, really? >> i do. >> this was from penelope. she played in a golf tournament. and she got to pick a man's tie. it's an izod, which i never thought i'd wear an izod tie. >> those are good colors. >> if i was a label guy, i probably wouldn't show you that. anyway, let's check on the markets. the futures indicate lately lower, down about 33 points or so, down 5 on the s&p. we'll see what's wagging these markets today. and i wouldn't imagine that -- i don't know, people in a bad mood because of that. almost 2% in shanghai. the nikkei down 3.3. do the math. that would get your attention. then in europe, they're all up. but not much.

let's look at oil. the oil board, that's been stubbornly above 100, but coming down slightly, $104.53. the ten-year, i saw, was at 2.56, almost 2.56. dollar n , if we're going to europe, it's got to come down. the euro, slm 1.43. gold on a little bit of a run. i'm thinking about buying some. >> really? >> because of man q. i read man q.'s piece in "the new york times" over the weekend. he mentioned buffett and all the people that don't like it. just because it's noncorrelated with anything else. he says 2% of your portfolio could be in gold. >> are you going to buy it anyway? >> no, no, no, no, no. >> store it. >> yes. if i could find a place to buy them where i didn't have to buy a big -- not a lot of them, but

i'd maybe buy a few of them in case i need to bribe someone in the future for something. >> always thinking. >> for something. i'm not sure what. but if paper money is ever useless. it could be food. it could be passing -- you know, going through a border somewhere. it could be more ammo. i don't know. >> grrr. argh. >> could be the zombies. >> and there's no dentists available. >> zombies aren't going to take gold. >> zombies don't like gold. time for the global markets report. if i ever want to give ross a nice gift. something gold. he's standing by in london. i'm trying to think, baby's about a week old. they got through the weekend. do we know any details -- is it colic? is there -- i'm not going to ask if there's bf'ing going on. not best friending. breast-feeding. that's tmi for the rf, for the royal family. do you know? are they talking about it? the tabloids in britain talk about anything. >> they will. they will.

i haven't -- i'm sad to say i am not up to date on the latest. we haven't heard anything particularly scaremongering or talking about feeding tips or anything else. >> ross doesn't want to. >> no. >> feeding tips. >> little decorum. that's nice. it's not like your tabloids have any -- you know, you brits act all high and mighty, but you've got the sleaziest media in the universe. >> you've got to have yin and yang, joe. >> is that what it is? i guess that is what it is. did you understand this advertising -- did you -- have you looked into what advertising companies do now, ross? it's like high-frequency trading. did you see that? >> yeah. >> they said -- and five years ago, they had none of these competitors five years ago. it's all high-tech competitors, these guys. it looks to me like two companies that need to get together just because business is so tough from competition. >> well, yeah, i mean, interesting is publicis has made a big move into digital and say

we're not getting involved in that game. i mean, that's an interesting deal. it's fascinating. i was talking to the ceo of havas. this story came out in "the sunday times" yesterday before the announcement. he had been quoted as saying "pigs might fly." and i spoke to him, he said, look, we never thought this was a deal that would ever get done, but clearly they've laid it on the table. and what's interesting about it is, for the likes of havas is the potential business it's going to give them. publicis stock won't start trading until about 3:30 this afternoon paris time. we spin forward to two of the european rivals, if this deal gets through, a lot of antitrust concerns, wtt up 1.70%. havas up 5.5%. if this deal went through, you'd have, in the same house, apple

and samsung. you'd have coke and pepsi. and you'd also have nike and adidas. there's a theory that those guys don't want to be handled by the same marketing and advertising group. so these guys are fairly hopeful, yeah, we want it to go through. we're not worried about an antitrust. they want a chance to pick up some of those big clients. the other question is a credit company with 120,000 people in it, how do you merge that and get the culture right? it's very much a people business, as we know, in the ad world. so plenty of question marks surrounding the structure of this deal. they're quite impressed, both quite impressed that the way the deal was structured. good deal pore publicis, bearing in mind a smaller business, a merger of equals as well. will it benefit the clients? that's a separate question. and of course, it is about the clients and the customers at the end of the day. a couple other stories we're also following today as well here in europe surrounding the

corporate focus. barclays down 3.5%. the report yesterday they're looking to raise $4 billion in potentially a share hike, selling shares to meet concerns from the bank of eng land. they've come out with a statement saying we'll report more after results on tuesday. they have been talking to the regulator. siemens up just a tad. peter loescher saying that the executive board is going to get rid of him on wednesday. there's going to be a meeting. he's had a second profit warning. he came out at the end of last w week and scrapped the target. he says he's not going unless the chairman who hired him also steps down. those are the stories we're following. back to you. >> i love that. wpp is up. it's like -- no, no, that's fine. yeah, go, sure. they've not no problems with this merger. it's like some of us here all

have the same agent. do you know that? we all have the same agent. and we wonder, how does that work? they have coke and pepsi. >> yeah. so clearly some people -- some accounts will get dropped off. or if not, one of those accounts will say forget it. >> and they've got to go somewhere else. that was a good point to bring up. >> that was a good point. ross, you managed to completely disgust me when you were talking about this new hamburger that's coming. >> stem cell burger. >> yeah. that's the grossest thing i've ever heard. >> created in britain, 250,000 pounds, about $350,000 of research. it's been made. it's going to be cooked and eaten next monday. and it is made from about 3,000 separate strips of beef that have been grown from a cow's stem cells. this beef has been made in a laboratory, effectively. it is a completely, in that sense, artificial beef burger grown from stem cells. the thing about it, if it works,

it's revolutionary for the food industry. and talking about this big jump in demand for protein. it takes -- if you're going to make beef burgers from stem cells, you use 90% less water, 80% less feed. it's all those statistics that they're looking at. would you want to eat it? >> no farting cows which cause a lot of -- supposedly cause a lot of the meth -- i don't know, something. greenhouse gases, all the farting cows. quite awhile smith yesterday in "the post" about the most perfect created. >> blueberry. >> no. >> blueberry is the best for your brain. >> double cheeseburger at mcdonald's. 23 grams of protein. you know how it's got this bad rap and you should be eating kale crushed up in a blender? >> neurologists have said the best food, if you have one food you could pick, it should be a blur berry. >> i would eat a hard-boiled egg. i'm going to send this to you because mcdonald's gets a bad

rap from all the froufrou lefty kale bloomberg types. >> they have salad there. >> no, there's nothing wrong -- it's only 399 calories, 23 grams of protein, it's got nothing bad in it. it's got some vegetables in it. and you think of it as you're going to die and get fat. people eat fast food, apparently people that eat fast food once in a while aren't necessarily fat because they don't gorge at home. i'm going to send this to you. >> i think it's variety. and i think it's moderation. >> everything is moderation. that's right. but i'm going to send this to you. >> ross, thank you very much. when we come back, steven cohen throws a weekend party at his hamptons vacation estate. >> greatest food in human history. >> double cheeseburger? >> mcdonald's double cheeseburg cheeseburger. plus, amazon announcing hiring plans before a visit from president obama. and we have a live report from egypt. supporters of former president mohamed morsi are holding a sit-in a day after deadly

clashes with security forces this weekend. we'll have the latest when "squawk box" comes right back.

welcome back. u.s. equity futures indicated down about 32 points. a lot going on this week. we'll see. a little soft last week in terms of the averages. although we were at some highs earlier in the week. making headlines, amazon unveiling a new hiring spree

saying it's looking to fill more than 5,000 full-time jobs at 17 of its fulfillment centers across the country. president obama is going to visit an amazon distribution warehouse later this week. and hedge fund billionaire steven cohen threw a party this weekend at his hamptons home despite criminal charges against his capital firm. one source said the lavish affair included delivery of $2,000 worth of tuna from a local fish store. the party was planned before the party. a few dozen attended. that's a lot of tuna per capita. the party was said to show support for ovarian cancer research. though it was not a fund-raiser. barnes & noble says its reasonable financial statement should no longer be relied upon. it includes statements for the last four quarters. nice. and for the fiscal year that ended in april 2012, the book seller says the statement overstated certain accruals, and

it's going to issue updated financials. let's get a national weather forecast from alex wallace. alex, good morning. >> good morning to you. i tell you, it wasn't a good sunday in and across the philly area. incredible amounts of rain. this is for sunday. eight inches of rainfall. it was an all-time one-day record in philly leading to all sorts of flooding problems. the good news is the system that brought that activity to philly is moving out of the way. this cold front, which is still going to be impacting across new england, showers, maine, places like portland, boston, that will be fairly quick to move. we don't anticipate to see that amount of rainfall like we saw in philly on sunday. clearing behind our front. so a beautiful day in pittsburgh and dnc.c. those areas in the 70s and 80s with that sunshine as high pressure builds on in for tomorrow. everyone gets the chance to dry out. looking really good for the northeast over the next couple

of days. once we get rid of the showers in new england for today. behind all of this across the midwest, feeling a little fall-like. middle 70s for highs. feeling a bit like mid-september in detroit for at least a day. then we'll see things warm back up into the lower 80s for the remainder of the week. again, feeling really, really nice. it's all thanks to the flow coming in out of canada for the upper midwest and great lakes region. those temperatures going to feel pretty nice for this early week. then as we get into the middle of the week, high pressure builds back in. we'll start to warm the numbers up a little bit. instead of seeing high temperatures mostly in the 70s, we'll see a few more 80s to deal with as we head on through the week. so 76 in chicago. can't beat that. once we head into tomorrow, actually cooler in chi-town, 73. well below average and feeling good. guys, back to you. >> alex, thank you very much. it was a vie leolent weeken egypt.

yousef gamal el-din joins us. can you tell us what the situation looks like right now? >> reporter: becky, tensions are still very, very high in cairo and across the country. you mentioned the violence, really the most intense it's been since the ousting of former president mohamed morsi. and also, there is a possibility for further escalation because you're seeing supporters of the former president out on the streets. they are trying to hold morallies and calling for a million-man march on tuesday. and on the other hand, you have the government and the military clearly losing its patience, saying that they will no longer tolerate the kind of sit-ins as they have in the past, and saying that they will try to break them up. so the political impasse is widening, interestingly enough, eu foreign policy chief katherine ashton in the country to try to mediate between the different parties and said that the muslim brotherhood would need to be part of the road map of the future of this country. and also some concern that has

been voiced is the possible return of some of the crackdown methods and also some increased powers for the prime minister that would allow him to ask the military to kraarrest civilians. those may be disconcerting developments on the political front. because the lack of national reconciliation will mean little progress for the economy in the long term. but if you take a look at the stock exchange, trading slightly to the down side today and slightly to the down side yesterday, really masking a positive current in the market, becky. that may come as a surprise to some. if you look at the last positive days, despite all the violence, there's been a rally. the markets up in excess of 13% in the past month. and also, some of the heavyweight stocks including citadel capital up 5% today and continuing some of that performance today. and much of that may have to do with the fact that people and investors are confident about this interim government, about what it can change with the economy. but again, also keep in mind

that i'm told by several traders and investors that this momentum cannot be sustained unless the national reconciliation is achieved. so you might be looking at a bit of a short-term rally. keep a close eye on those etfs as they go into trading today. it could make for quite an interesting ride. >> yousef, thank you. very interesting to watch given what's been happening. we'll continue to keep in touch with you and see how this situation progresses. thank you for joining us this morning. obviously no shortage of news for investors to digest this week. joining us, two economists. mike, you've got earnings, gdp, jobs, the fed, all of these different things to be watching this week. what do you think the biggie is going to be? >> oh, i would probably say the labor market report at the end of the week. we've seen this odd divergence between the income side of the economy that's been doing okay, job growth running just over

200,000 at an average, wages starting to do better, hours worked looking okay. so gross domestic income has actually been fairly strong over the course of the last couple quarters. but gdp has been quite weak. so how those two are reconciled i think will be of interest to the fed. you can probably just cut and paste the statement from the last fomc meeting. i don't think they'll break any news this week, but they'll be watching in the months and quarters ahead to see how those divergences reconcile themselves. typically when the income side of the economy is diverged from the expenditure side, it's the income side that's more accurate. and that would also be consistent with the stock market essentially at record highs and nominal terms in bond yields and moving up in the yield curve steep steepening. >> i think the consensus is for a jobs number of 180,000. what are you expecting? >> we're expecting something

very close to that ourselves. just to the point earlier, we are seeing this divergence in the data. the labor market's doing pretty well. gdp numbers aren't reflecting it. i would not be surprised to see an upward provision in gdp numbers. but we know we're going to get that anyway because of the rebasing and the recalculation of gdp. they're going to add something like $400 billion to the level of gdp. that's going to affect growth rates going back a ways. we're likely to see a gdp pattern that looks better than what we thought before. >> but that means what? i mean, if they go back with the revisions, mike, how much does the market put any weight into that? or is this just how we measure things going forward? >> right. well, i mean, the market will be looking ahead and discounting the future. and i think the message there is for a stronger recovery. or at least for some of the weaker data, i think, to move into line with the stronger figures that we've seen recently on jobs, on auto sales, on new home sales. both of those are at cycle highs for june.

typically those sectors tend to lead the rest of the business cycle. so i think, you know, things look okay. >> things look okay. and as a result, you would put more money into the market? >> well, i think the s&p 500 has discounted that stronger growth. i would not at all be surprised to see a period in which the data look good and the market goes sideways for a while. but if this cycle lasts several more years at a minimum, as we believe, then the market ultimately should make a succession of new nominal and probably eventually real all-time highs. >> do you think the market's at a point where good news is good news? because they've been watching what the fed has done for so long and have been hoping to have quantitative easing continue. but have we gotten past that at this point? >> i think so. i think the market's probably going to react sort of day to day, week to week to the incoming data rather than sort of roaring ahead, anticipating a recovery, which to some extent they've been right about. so i would agree with the assessment that we're probably

going to see a sideways movement for a while. some of the earnings numbers are going to continue to disappoint because companies are running into a little bit of resistance in terms of top-line growth. there's only so much cost cutting they can do. the earnings picture isn't looking that great. i would agree with the assessment that we're not going to see the same kind of increases we've seen recently. >> all right. gentlemen, thank you very much for joining us on a monday morning. you guys have a great week. >> thanks. you, too. coming up, an earnings report card. we're halfway through the corporate reporting season. and you'd be surprised at some of the things this gentleman has to say. first as we head to break, a look at last week's "winners & losers." ♪ wild thing ♪ you make my heart sing ♪ you make everything groovy ♪ wipeout ♪

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it is halftime. almost exactly in earnings season. nick is the ceo of earnings scout. and nick, not everyone thinks it's been a great -- a great reporting season so far. but you do. what are the things that make you think that? >> right. well, we think a lot of people think it's not great because they look at the earnings as if it's a snapshot in time. we look at where it's coming from and where it's going to most importantly be. and when you look at it as a

snapshot it time, it does look bad particularly with third quarter guide wasn't. we see 53% of companies that have reported are lowering their third quarter guidance on average by 1.8%. but the key here is the rate at which they're lowering it isn't nearly as bad as the quarter before or the quarter before that. we're seeing rates have changed. is x that's a positive. and the other thing we're seeing that's a good positive that was not expected is a reacceleration of both sales and earnings growth rates from the first quarter. >> what about revenue? >> that's what we're talking about, the sales. the top line is reaccelerating. 52% of the companies reported sales growth is running at 4.5% for the companies that have reported. >> year over year. >> year over year. >> last time -- what has it been running? >> well, it's been running anywhere from 3% to 5% year over year. but in the first quarter, the sales rate was only 2.5%. people who say earnings growth is fine but sales growth is weak, that was a true statement in the first quarter.

steals really weakened. what we're seeing is a reacceleration in the year over year for the second quarter. that's been a positive and something that was not expected. >> are there sectors that are doing better than people think? >> the clear-cut winner here is definitely the financial sector both in terms of earnings growth rates, percentage beating and positive guidance for the third quarter. but when we exclude out financials, and it's been the clear winner, the sales growth rates for the rest of the sectors is still pretty good. it's about 4% sales growth. a lot of people are saying if you exclude financial results, certainly earnings results do come down. the sales numbers for the financials haven't been that great. earns have been fantastic, though. >> nick, it's been going counter to what a lot of people are saying. you have "the wall street journal" out with a story that questioned all this. what are they looking at that makes them question whether

earnings are good? >> we want to change the way people are earning their vi ivi earnings. they're not seeing improving trends. over the last two years on an absolute basis, earnings estimated for the s&p 500 have done nothing but go down. it's getting less severe. and that's positive improvement. what we're noticing is it's accelerating. and the key we're noticing for the second quarter as well, too, of why stock prices have rallied 5% in july and the market's seeing the same improving trends we're seeing. and a lot of people thought the second half estimates were way too high. what we're finding is estimates for the second half are just a little bit too high because they're coming down but not nearly as bad as feared, and that's a positive. >> interesting. so becky, most companies for the third quarter guidance, they lowered guidance by 1.88%, which sounds bad. except the previous quarter they

lowered by 2.3%. the one before that, 2.65%. the one before that, 3.5%. so the trend is that they're lowering their forecasts less than they had in the past. >> that's exactly right, joe. and if we would use an analogy ever since the fall of to2011, we're ooedsing off the brakes, if you will. and that's a big reason why stocks have rallied. it's been about the fed. the fed has supported those earnings, but we've seen positive rates have changed expectations. again, a key for the rally. >> and based on all this, based on the second quarter and the guidance, there's an increasing chance the economy's going to pick up steam. so you can take these little pieces of the puzzle and think that overall that it's going to be better. but gdp, what is this, this is in the rearview mirror, the one we're going to get this week? >> right. the gdp has been a little bit of disconnect there. corporations have not been given enough credit for cost cutting

and managing through some challenging times. >> they don't hire anyone. when are they going to hire someone? >> that's the key. we need that. jobs growth is -- if you'd ask the fed, they certainly have propped up earnings. but i think if there's one thing that's disappointing from the fed is job growth hasn't picked up fast enough as well. >> all right. nick, thank you. we appreciate it. you're in cleveland, you've got a little logo and everything. is this the first time you've been on? >> i usually go on "closing bell." a long time ago, i started -- >> is that -- >> pardon me? >> kidding. no, that's a great joke. maria is the best. and bill griffeth. thank you. >> thank you for having me. >> we'll see you. when we come back, snap chatting on wall street. traders using the app to send messages that quickly disappear. in fact, they can disappear as quickly as one second later. but is this new way to commit illegal insider trading? that story is next. "squawk box" will be right back.

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making headlines, saudi prince said that the arab kingdom needs to reduce its reliance on crude oil and diversify its revenues. as rising u.s. shale energy supplies cut global demand. that's an amazing statement coming from him. that the middle east might need to diversify because we are going to become major players in that business. that's like the greatest -- i mean, i want to read that again just to say it again.

>> it makes you feel good? >> doesn't it make you feel good? >> yeah. i told you. >> i mean, i like him, although he hasn't been on our show in a while. i've seen him on others. i would let him yell at "fortune" and "forbes." i'd be with him on that. which one was it? >> it was "forbes." it was "forbes." >> that lowballed. he doesn't need to be lowballed. he's made some big investments. >> maybe he'll come back soon. >> i don't know if i'll have him now. >> yes, you will. when we come back, snap chat, if you have teenagers, you've probably heard of this app. if not, we're going to tell you all about it and why it is now raising regulatory red flags on wall street. we've got some questions about that. we'll have the story when "squawk box" comes right back. to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection.

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you haven't been positive on m&a for a long time. come on, are you bankers not selling hard enough? >> you've got a mismatch between buyer and seller expectations. >> you want to be an emerging partner and advertise, you've got to funnel money into facebook. welcome back, everybody. snap chat has become immensely popular among some of wall street's younger ranks. now with messages that self-destruct after mere seconds, is this the new face of insider trading? kayla tausche is here with more on this. i didn't even realize this was something that all the younger ranks were using there. >> everybody is using it. i don't think people realize how popular this is. it's doubly as popular as instagram which you feel like everybody is on these days. when you think about wall street's younger generation, it's grown up fearing the repercussions of social media. no surprise that technology that makes messages and pictures

disappear would be a gold mine. it was developed by a pair of stanford students not even two years ago. now 200 million of these so-called snaps get sent daily. and it has a valuation of over $800 million. nowhere has it been more popular than on wall street where young workers like to document their travels, but it still has become the communication tool for this younger set. the fear is that the disappearing message will be used for more ill. jim cramer put that question to the u.s. attorney for the southern district of new york at delivering alpha last week. >> can the bad guys' snap chat go by leap wireless and get away with it because you don't have the technology to stop it? >> i don't even know what you're talking about. >> for the most part, wall streeters in a straw poll did say no. an analyst at the hedge fund said everyone uses snap chat for stupid stuff. mainly people in the hamptons

send videos of surge lodge or cyril's on sundays. never heard of anyone doing it for anything more serious. i personally haven't heard about it. i highly doubt it will be. after all, you can screen shot photos. if i had to guess, i bet there's some way to retrieve used snap chats. in fact, there is. if you look at the fine print, it says, quote, we cannot guarantee that deletion always occurs. there may be ways to access snaps while still in temporary storage on resip jentds' devices or forensically even after they are deleted. >> oh, my gosh! then what's the point? you feel like you're safe. >> that's the interesting point because i talked on a consultant in utah who's gotten into this business of retrieving snaps from an tried and ios for lawyers and divorce cases where one of the parties feels that the other is cheating, and they think that snap chat is the evidence. and so these people have found out how to crack the code, how to get these messages and how to get in there. and even though he doesn't know

exactly what it is, if you have a subpoena, if you have something from law enforcement officials, i'm pretty sure you can get into these. >> but that's even more dangerous because people feel like this message will self-destruct after three seconds. like this is the great way

. >> kevin, this is something you say you have seen kind of exploding and that all of the younger people on wall street are using, too, does anybody higher up know about this? >> i don't think so. i think it's still pretty much a secret among the younger workers. everyone i have talked to under 30 knows about it. a lot are using it every day. >> have you ever heard of anybody using it for anything other than fun, wild partying-type of situations? has anybody used it for messages, for business that they didn't want to get picked up? >> no, most of the people i talked to used it for the kind of things we have been discussing, parties in the hamptons, some people i talked to said that they'll send photos of their cubicals at midnight on

a friday night to all their friends saying that they're stuck at work. here's the excel spreadsheet keeping me at work. i haven't heard of anyone using it for insider trading or anything like that. i doubt they'd tell me if they did. >> kevin, covering this case, a lot of the questions asked have is insider trading what it used to be? the question that jim cramer asked can someone chat on friday afternoon at 3:00 p.m.? the nature of insider trading isn't that tips are like that anymore. they're a little more vague, innocuous. do you fear that the nature of some of the content on snapshot could go in that direction even if it's not there now? >> sure. i can easily see someone snapping a photo of their computer screen and oh it's not a hitch book for a deal they're working on as an investment banking analyst. that could easily happen accidentally even if they don't mean to, so i can certainly see the appeal of this and think about how many traders and

bankers we've seen burned by their old e-mails, you know, everyone from the guys involved in libor to fabulous fab, from goldman sachs. if he had a smapshot, he may not be on trial right now. >> but those e-mails were company property and snap chat for the most part is downloaded on a personal device. so do you think a company has as much propriety over those messages? >> no, that's the whole appeal. you don't want your compliance department looking over your shoulder at your facebook photos, so, you know, you snapped them instead. it's not completely safe. it is much safer than doing it over your work e-mail. >> if you had to guess, do you think this is something the higher up, the managing directors will may pay more attention to now it's getting more publicity? >> i wouldn't surprised if they're curious, if they see their junior analysts snapping away, they say, what's that?

they start asking questions, if i were a compliance officer at a big wall street firm, i'd be sweating about this. >> the second you see your boss snapshot. >> run away. >> you will probably start worrying, kevin, what are you snap chatting, too? >> i snap chat a lot of random moments from my day, photos of where i am, what i'm doing. i haven't tried it out an any insider trading, but, you know, it's certainly something i think probably someone at some point in the future will try. >> wait a second. if you are sending average pictures of what you are doing through the course of the day, why do you need this message to self-destruct? >> sometimes it's embarrassing. or i, you know, i'm not looking my best. i rolled out of bed or something. sometimes it's stuff you wouldn't want on your facebook profile or twitter page. it's mostly a novelty for me. i do know some people that use it as basicallier that primary mode of communication with their

friends. >> kevin, thank you very much for joining us today, kayla, we will see you later today. >> coming up, earnings in the economy. we will get ready for the week ahead of a duo of guests. first, though, "wolverine" claiming the top spot with 55 million in u.s. and canadian ticket sales, a little below what they had hoped for. .

> . are you ready for this? on tap this week, a fed decision? could it be more tapering talk. plus a read all followed by the big july jobs report. >> it's halftime in earnings central and things are just getting interesting. about a fifth of the s&p 500 are due to report quarterly results this week. the second hour of "squawk box" begins right now. ♪ good morning, everybody. welcome back to "squawk box" here an cnbc. i'm becky quebec along with joe kernen. andrew is off today. they are down 18 points. they've cut their losses in half since we started earlier this morning. s&p futures are down by two-and-a-half points. this comes after modest advances for the markets last week.

let's get to some of your morning headlines. a number of mergers and acquisitions in the news, irish drug maker elan is being bought by michigan drug maker perrigo for $8.6 billion in cash and stock. share the holders get another $10.25 in stock for each share they hold. u.s. based omnicom combine. however that, deal is expected to face intense regulatory scrutiny t.ceos of both companies will join "squawk in the street" at 10:10 eastern time. and we are just getting word of another deal. it is official. lord and taylor owner hudson's bay will buy retailer stacks. our brian sullivan has been reporting beforehand this deal was worth $16 per share and provides a 40 day shop period

which people can seek out other potential buyers. that stock is up about 4.5%. >> you have the history of saks. >> like the profits when they first came in. >> it's that space in new york city is probably the greatest retail space in the world. >> across from rockefeller center right there on fifth avenue. >> six floors. in walk news, president obama now says he's narrowed his choices to zayead fed chairman ben bernanke to, in his words, to some extraordinary candidates. in his news, he says he will announce his pick over the next several months, former secretary larry summers and janet yellen are considered to be the two top candidates. an interesting lead editorial talking about both and an alan binder piece recommending yellen. it's interesting that people have said that summers came, people said, no, no, no, no, no,

the white house definitely orchestrated a trial balloon. now the question is, they've never really floated one on yellen. i guess she's thought to be the presumptive nominee, anyway. >> she was out before larry summers. >> she already was. the president in the past has done what he's wanted to do. >> they pointed auto an interesting point last year, which is these fed chairman, they all have spent time in the white house before they go on to this position. >> summers has been through a lot. served a couple presidents, has been loyal to president obama. it's going to be interesting. now the trial balloon is out. the far left got its panties on a unbech about summers. we will see whether that quiets down. >> whether he cares the president is not facing re-election again. >> yeah, but hillary is facing election. and pointed out in the "journal," he would do

everything he can. oh, yeah, i have no doubt about. that jack lew used the talk show appearances to warn congress against what he calls manufacturing a crisis over federal spending in the months ahead. >> look, david, i think the american people are tired of the kind of problems that washington creates for itself and for the country and we saw if 2011 how much harm it does to the country when we have those kind of self inflicted wounds. we shouldn't do that again. >> you said even at that time that confidence in the economy is really undermined when washington becomes a part of the problem. >> the fight over the debt limit if 2011 hurt the economy, even though in the end we saw an extension of the dead limit. it hurt the economy. >> by october 1st, congress and the white house must agree on a stop gap measure. plenty of economic data. let get to our guest host, michael ryan, head of wealth

management research at ubs and bob bar barra, co-director avenue at johns hopkins. >> guys, before you start this, can i tell you quickly, there is another letter from carl icahn. this is an open letter he is sending to shareholders complaining about the special committee to change the voting method for that unaffiliated stock approval. remember, michael dell last week raised his bid for the company by a dime. he said he wanted some changes, the big question has been, if you don't vote for this, it's considered a no. if you don't vote affirmatively, it's considered a no vote. he wanted the rules changed and carl icahn is saying that's unfair, that shouldn't happen. >> does any of it set to lead in? ephithet delete? >> no, there is this thing where he's got some weird dollar signs. >> epithets are curse words in the oled days. >> there is a dollar sign.

>>. >> no pa ren the cease. i can't believe carl didn't vote. i would add 30 f-words. >> i noticed from the beginning, ladies and gentlemen. >> yes i can show you where le put them n. they are implied, really throughout. i'd say 20 per paragraph. >> he's also basically calling michael dell a liar on this he says, contrary to what michael dell has told the "wall street journal" the turnout at the special meeting now rescheduled for august 2nd is not unusually low, based on dell's previous stockholder meetings should not have been quote unexpected. so he's questioning a lot of what he said, these things. i'm trying to look quickly to see if they've raise raised their own deal. says, finally, we do not believe you should change the record date for determining all of these. we also believe that a few bird should be elected at dell and we have proposed a slate of directors.

we urge the special committee not to ignore their contractual commitment and not change the stockholder approval. that's the latest from icahn on dell. we'll see what else is in this. it's a four or five-page letter. >> we introduced her to our guest hosts. let's go first of all to what we are talking about. we had an off camera conversation and, mike, you think the problem with summers might be from the right. not from the left? >> actually, i do think it's more from the left. >> the left? >> yeah, the things that where summers has had more of his problems has been is he's angered some of the left base. >> deregulation, lings things like that. >> not only that, his ten years at harvard, that caused issues and comments. one comment can change an opinion. i think he's going to struggle through it. but again, i think if you look at the capabilities or the qualifications, i certainly think that he's someone who i think would be a strong

representative. >> you prefer him. >> i don't say iprefer him. i think the characterization over the weekend is he probably doesn't agree with qes and a couple papers where they cited in the papers they thought qe was relatively ineffectual. i think that was a misread of the papers. what he was advocating was big fiscal stimulus. he was saying that would be better than qe. if you don't have fiscal stimulus. if you got sequester, he's certainly not going to be a hawk. he's going to be in a position where if that's all we got, we will be playing for the stars. >> you want infrastructure based on let the federal government just borrow the right. >> if you borrow 1.5%, can you build a bunch of stuff on after inflation basis, nothing. and whether or not you agree with that, to characterize that as a hawkish position is, that is not a hawk. so on that score, i don't see the left as having any problem with them. i think you are right, on the, you know, women can't do

economic jobs, that was not a clever. >> that was, they ask him, you know, it was a meeting of academics. they asked him to say something controversial. >> the thing he said right before that which was my favorite part of the speech was he said, i think there should be more jewish men in the mba. >> did he really? >> yeah, he was having fun. he was taken out of context. everybody went crazy. >> do you think his comments were so taken out of context. wasn't the original temper him of what he said. >> as far as the economy goes, let's start with you. you are an economist, aren't you, that doesn't mean you will be wrong about everything, right? >> actually, did you see the general this morning, where they handicapped all the fed governors based on their speeches, who was wrong, who was right? >> yeah. yellen was pretty good, wasn't it? >> yes. >> she was dovish? >> i think the simple linkage if you throw a bunch of money in the banks, is that going to produce inflation if you got a

lot of unemployment? the hawk said yes, the dove said no. the doves look right. >> where are we on gdp this week? >> .8. a weak number. probably on friday a decent number for the employment. >> and that to me suggests that it is a temporary gdp weakness. >> last long? >> well, we're in the off to the races. but i would look for a somewhat better second half. >> you have a similar view on the backdrop, that makes stocks attractive? >> we do. >> you are cio, ubs wealth management. >> chief investment strategist for the u.s. business. >> you know that ge had kiter, which became keen weber, which became something which became ubs, which means you held all of our stuff. which means are you handling some of my incredible wealth now. >> i have been a part of every part of that. >> 29 years now. you've got a real important job and i think this might filter

down through my guys that are handling my massive holdings, might be coming from you. so i want to really see if you know what you are talking about today. >> you put me on the spot. >> don't you feel a lot of responsibilities? you have two kids you want to take care of and a wife. >> look at that, bob says some of the temporary issues will likely hit, the gdp report. there is inventory issues, there certainly issues of level consumptions, certainly the data you see now confirms we will get decent levels at the job growth t. manufacturing sector has gained in momentum again. i think we are encouraged for the outlook for the 3rd and 4th quarter. you want to see job growth. that's continued strong. you want the unemployment rate to come down. not so fast that it re-awakens these concerns about an accelerated tapering. i think the pace, the unemployment techer still. that's kind of the right balance of growth that you want to make

sure the fed doesn't have to act sell rate this winding down. >> you could easily make the case if the jobs are better, the unemployment rate will stop going down. >> people will come back? >> yeah, if you look at the data on the plunge and the participation rate, it's not old people retiring early. that's gone up. for the. it's the opposite. it's 16 to 24-year-olds who can't get a summer job. so if the economy is better, you will be in a position where they will come back to the work force. >> then the fed will need to change its guidelines as to when it tapers then. >> well, i think what it says is you can handle somewhat higher speed limit, right. if are you in an environment where you are growing at 200,000 and the unemployment rate is not going down, that's not -- >> this 6.5% for the feds should be looking -- >> my point is you will get to 6.5 a lot more slowly if people come back. >> they will be tapering. they won't be tapering.

>> let's be careful to remember bernanke has basically said we have to be careful about how we interpret the gdp, the employment numbers as well as the unemployment rate. we have to take in account as rob said, the folks re-entering the job market have basically been -- >> that's the way they change. that's the way they modify. >> we talked about this the last time. i do think it's the game is boiling a frog, right? you want to leave the room with nobody noticing you left the room and so, you know, we talk about a trial balloon with summers. >> an 800-pound gorilla. >> i would arc you the bond going from the ten the year to 160 to 250 now it's hanging around 250. that's good move. right? it wasn't really upsetting. equity marks are near their highs. you have your first move. so you took two stepts towards the door. >> you think the yield is going straight up from here? >> not straight up. but if in 2016 the unemployment

rate is 5.5 gdps of 3%, where should the four year be? 4.5? so how do you get from 2.5 to 4.5? it's boiling a frog. you want to sneak your way over there. >> it's will not interpret that move, actually it peaked at 2.7. that was the initial reaction to the trial balloon the whole notion of tapering. >> that's when bernanke and the rest panicked. >> they basically tried to put it in complex. let's not confuse tapering with tightening, there is a significant difference between the two. >> we will get more from mike and bob throughout the show. >> when we come back, we have investment ideas from the common fund, a firm that works with non-profit and pension investors. first in corporate news for you, toyota will be adding 200 jobs and investing $30 million in manufacturing in a plant in indiana. the auto maker wants to boost production of its highlander mid-sized suvs starting next year. "squawk box" will be right back.

o. >> welcome brack. "squawk box" making headlines, a survey finds oil drillers in the bakken shale fields are allowing nearly a third of the gas they drill to burn off into the air. it has a value of more than $100 million per month. the controversial practice commonly known as flair

flareing. you can see it. inaugural gas must be immediately piped to a processing facility and drillers are dealing with remote well locations. historically low natural gas prices and the extensive time needed to develop a pipeline network and it's not that much. >> $100 million? >> $100 million worth. it costs more to build something to harness it. you got to drill it and find it. it's weird. >> a weird issue. all right, our next guest is trying to find a way to maximize returns and is turning to investing. it's an investing firm in the non-profit and pension investment space. he's also the former ceo of harvard management. thank you for coming in today. >> thank you. it's great to be here. >> can i ask you about the state of pension after all the news from detroit, people are really

concerned about what this means for the pension funds and others who have been saving for a long time. are pengs across the country in more trouble than we've realized? >> i think they have been in trouble for a long time. clearly, the financial crisis bust plus the challenges of particularly state and local governments have resulted in continued underfunding of the pension plan. so particularly if you look at the state and local side, i mean, there is a serious issue. there may be states and localities that have somewhere between 50% funding and 70% funding. so there is still up to a trillion dollar hole that exists among state and local pension plans that has to be funded. >> if you have a 50% underfunding, how do you fix it at that point? a lot of this happens from years and years. >> really, the way has to be compromised. >> have we determined if you have a general obligation bond and a big unfunded liability? who's in line? who's first? >> well, that's an issue.

i think different states have different challenges. the detroit bankruptcy is going to be a critical issue in terms of working that out. who is first? they have a recent bankruptcy in rhode island where the bond holders played all their money back, got all their money the pensions took the hit. michigan has a law which says it's basically a general obligation of the city of detroit to pay the pensioners. will all be worked out in court. the thing i worry about is with this large amount of underfunding that exists that we're in a situation where if it appears that states are particularly localities can get out of this large pension issue by declaring bankruptcy, we may see more bankruptcies. it really will be. >> it appears that they're online with you then it really changes the nature of being able to -- >> assess how you go in. >> how do you assess? >> how do you pay for money if you are raising mo in? you think you are on the queue

with the pensions. >> right. i think that will be worked out in the next two or three years in the courts in michigan. >> and the lawyers. >> and the lawyers will do very well. they always dos. >> and accountants as well. >> you are talking now about state constitution, right? >> yes. >> you are talkinging about federal bankruptcy courts. the issues are who has supremacy here. this is not just about detroit, obviously, which is in the news right now, but there are other cities and states watching very, very closely, a lot of the municipal workers are careful at what's happening with the detroit bankruptcy. >> the charitable trust estimated any cities more than 500,000 have roughly $261 of underfunded pension. that's just 50 cities. when you look across the whole state and local landscape, it's almost a trillion dollars. it is a big issue that has to be addressed. it is a fundamental issue of intergenerational equity we have

to wrestle with in this country between this generation, the next generation, the people have to pay these underfundings to come. >> is there a silver leaning? let's take this for a moment. suppose there is some, you know, dynamic that goes across where the federal bankruptcy court is able to put aside the state constitution? does that kind of open the agenda for others to start renegotiating pension funds put in place already and basically allow us to get through these pension obligations we know are going to be problematic for several years. >> i think they will be problematic for the next decade. so if it works out in favor of the bond holder relative to the pension holder, obviously, that has another significant impact on the city of detroit. because these people who are expecting pension payments aren't going to receive them. on the other hand, if it works out in favor of the pensioners, then, you know the cost of money for municipal finance is going to go up significantly. yeah, it will be an interesting challenge that has to be worked

out. i don't think it will be solved in two years. maybe ten years. but it is going to be a continuation. now they've addressed. >> you want to solve it before the pensioners are all -- >> maybe. the interesting issue is if you look at what they've done with current obligations is they've gone to, you know, defined their contribution plans as opposed to define benefit plans. we got this whole group of people who porkd for city and state governments for decades who had an expectation of payment. they're going to be. >> they can't be paid. >> do you send the checks in to resolve it? what's the status as are you in court? >> the status is you are in court. you don't make the payments. right. you basically say the bankruptcy court will work this out. until we do, we have to protect our cash and protect our cash, we'll accumulate our cash. we'll see how the bankruptcy court decides to split up the dividend that comes out of it.

i do think it's a long-term significant issue that we face at all levels of government, not just state and local, also federal level. >> and, verne, that really ups the ante, makes us understand why you are looking for ways to outperform the market. i know one is energy investing. can you tell us kwukly about that? >> there are four kind of major areas. one is energy and the environment and how the changes that are going on in energy, any environment, both in the eus an oversays are really going to impact the kind of returns that we see. and certainly as we look at this energy revolution in the united states, with fracking even though they are still burning over $100 million worth of gas a month, what we see is that energy revolution, which the u.s. leads today, has completely changed the balance of energy power in the world and i think from our standpoint, we look at that plus some of the other trends we see, particularly in

robotics, u.s. economy, u.s. companies, particularly manufacturing companies, are in line for a comeback. again, this is not something this next week or next year. this is kind of looking at three to five years out. think about trend that are going on. >> verne, we will have you come back to talk about those other themes. we appreciate having you here. the pensions are something atop of our minds, please come back again soon. >> okay. great. thank you. coming up, a high profile executive change at apple. can r. . centurylink. your link to what's next.

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. >> coming up, some changes at apple. plus, gold coming off a big week, getting back above 1,300. we'll look at the investment prospects right after this. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac ats for around $299 per month or purchase for 0% apr for 60 months. come in now for the best offers

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. >> welcome back, everybody. in our headlines this morning, it is official, lord and taylor owner hudson's bay is buying sacks for $2.9 billion. sak shares closed at $15.31 on a friday, right now 15.92 is where it stands. ppg industries is selling its stake in transitions optical.

that's the company that makes so-called transition lens for glasses that automatically change tin. ppg will get $1.73 billion for its stake. the buyer is algor, which held a 49% stake in tran sixes optical. the national association of realtors will be out with june pending home sales. the numbers at 10:00 eastern time. measure signed but not yet closed hits its highest during six years in may. and $53 million in jewels was stolen over the weekend from the carlton intercontinental hotel in cannes, france. heist took place at a temporary jewelry exhibit. nbc's michelle ka zin ski will have more on what is being called one of the largest jewelry thefts in recent years. also, apple says it will shift its senior vice president of technologies to work on

special projects, bob mansfield has led the development of a number of apple devices, including the macbook air laptop. he is the latestest edition to tim cook's special team. we will check on gold price, joining us, prescious metals and mining analyst, a.g. stern had a bounce off the bottom. is it going to continue or if you owned it, would you sell it? >> joe, i think it will continue. certainly this week, all eyes are on the fed and what comes out of the meeting after tuesday and wednesday. sentiment has gotten a little bit better. but the dollar is down 3% from its peak in july. gold bounced 8%. physical demand continues to expand as prices are lower. prices bauns bounced off the bottom as well. i think gold's rally will continue. >> so the fed started us thinking about tapering. the dollar hurt gold initially. now as they backed off anything

imminent. that's what's caused the dollar to weaken and gold to go back up? >> i think from the tapering stand point, back in late june, gold went through quite a bit of technical support. dpold washed out at 1180, 1190 an ounce t. dollar had peaked. yes, certainly there is an inverse correlation between the two. i think the markets will not so much focus on this meeting but more so in september. >> the writing is on the wall is eventually they will exit. why wouldn't gold resume a downward trend? >> so it's interesting. eventually, they'll exit. certainly, gold prices at 1,200, $1,100, $1,000 an ounce to me, joe, discounts that the move will be move an successful. i think the market at times will doubt that. ily that will give gold a bit as we move forward the next couple

of years. >> the gold price, if you look when they started the second qe in 2010, november of 2010, gold prices are lower now than they were then t. dollar is a bit higher than it was thenf then. inflation is lower now than it was then. so the whole buy gold on the qe story you know doesn't seem to have worked over several years. >> so the excess liquidity that not only the fed has created. also other central banks around the world, it will i think continue to give gold a recovery here. what we really haven't had in the market is the increase in velocity of money. so we've expanded a lot of liquidity. velocity hasn't picked up. over time that could spark inflationary expectations. right now certainly the market does not have. real interest rates on five and ten-year notes are certainly more positive than they have been. but if you look at three, six month, nearer term areas, where duration is not an issue for gold, we still have negative

rates. i think that will help gold from moving forward. >> i don't know what gold trades on now. why did it go to 1,900 when there was no inflation? >> certainly, joe, in 1,900, you had fear in the marketplace. >> why did it go up if it's inflation? why did it go up from $300. >> joe, gold is one thing being an inflation hedge, gold has properties that people who own it around the world, not just u.s. investors, look at what's happening with currencies. >> supposedly, it does all these things. then i can show you a period where it didn't respond to any. each one that it supposedly responds to, it doesn't respond to from different times. it's totally confounding what it's doing chlg it's almost like if you want to buy it. >> joe, let me go back to something mike said. i think this is one of the things. there are different properties of gold, different demand drivers at different times. one thing that consistently helps you get a better

understanding is the real rates. as long as they were low, gold is decent. my kwern concern, i question here is if we were talking a minute ago, as rates normalize and real rates move from negative to platte to then positive, what implications will i have to go longer term? >> the five year forward, the old tips yeel was minus 180. it's now 50 basis points. >> 50 basis points are still very low. but it's come off the bottom and if this normalization continues, i don't see why gold continues to go down. >> well, go ahead. >> no, saying from a near term when you are looking at absolutely the dollar is going to find the bid and real positive, it's a strong, vibrant investment plan. look for dollars in the economy. the world is doing just fine. yeah, gold is probably going to trade down 13, 1,400 level and find support at a lower price. io eng the jury is out that will

be the case. >> the average price of gasoline rose for the first time in ten weeks. let's bring in carl larry for where we are headed. he is president. how high will gasoline go just based on where oil is right now? >> well, i mean, you look at oil right now. the price of gasoline is around 3.75, 380. we can easily go to $4. people forget, as we get into the end of the season, into fall, prices get up higher, demand gets higher. it's a balance. we see oil prices go higher. gasoline will follow. >> do you guys not worry about that in terms of gdp? >> i think if you look at oil, it's been in the trading range now for years. >> 4, 4.50 for gasoline? >> sure. that itself a tax increase, effectively, for the consumer, but it looks like it's at the high end of the trading range. >> is the global economy justify where oil prices are? >> no. >> why are they there, carl, if

it hasn't justified? >> that's a dichotomy. you know, the u.s. has now become a major exporter of refined products. so there is demand there. global demand for food oil is probably not as high, here in the u.s., we're refining a lot of product, 60 million barrels of crude oil. we are sending out almost three million barrels. >> that's an increase in supply, not demand. >> we were averaging demand. we were exporting 2 million barrels a day last year this time. so demand for refined products is there. demand in a big picture maybe not as strong, but for products, it is, it's a strong market. >> it's just odd with china looking weak and our supply increasing substantially that the price is at the high end of the range. >> oh, i mean, we're at a high end of our range. two months ago, a high end of the range was $95. now we're looking at 10 -- 105,

108. >> people in the past said it was qe. i think it has something to do with qe. also, wealth manage. when you see hedge funds decide something is going to go up, doesn't it go up? >> at lowest a period of time. >> gold, too. >> you tend to get, obviously, when there is a concentration of wealth. when there is a leveraging, obviously, you tend to see an asset class move one directional. i think over the long term, it will be the fundamental also. >> on the qe piece the dollar is up and commodity prices excluding oil are all down. you know, the whole complex outside. >> something else is going on with oil. >> it's another way. >> the other way. >> let's not forget, a lot of things, this whole issue about refineing in eight years. so the whole notion is part of this demand for oil are high is there is demand for fine products. that's pushing oil up in the short term t. question is, what's the end market for those refined goods, how well will that hold up? >> we had the guy on, $50 like

within six months or a year on oil. we're going to 50 again, carl? >> no, no way. the only time we ever gone down when we saw a recession from say 'o1 to 'o9. oil went down. it took a major recession to -- it was 147 to $90 i'm sorry to $30. we went right back up and averaged 260 for '09. 80, 100. there is not a good reason why it would go down. >> except for fracking. when we convert our whole truck fleet to natural gas, electric cars, tesla. exactly. all right. thanks, carl, michael. >> thank you. >> all right. >> you are welcome. >> thanks, joe. >> i don't have any idea gold or oil after that. do you? more common fused than ever. >> i'll give you a magic 8-ball. when we come back, it is a big earnings week for media and

entertainment companies. up next, we get a preview of what to expect and an update on the dispute between time warner and in the next hour, we will be joined in a cnbc exclusive a. first look at the xen's new all electric car. the i3. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. time to have new experiences with a familiar keyboard. to update our status without opening an app.

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. >> the dead loin for time warner cable and cvs to reach a deal is today at 5:00 p.m. those two companies are set to report quarterly results along with several big names in media and entertainment. joining us is a senior media and entertainment equity analyst in new york. what do you think will happen with this fee showdown? >> i think it will come down to the wire. these two companies are well aware this is a very sensitive issue. i am in a day i do believe there is going to be a deal. ultimately, the industry does not want to attract unwanted attention from washington. so i do believe that, you know, you are going to see some kind

of compromised solution here. >> can they both save face or is there someone that comes out a clear winner? >> it used to be a content provider would typically have the upper hand in situations like this. what you have seen in situations where time warner cable is facing no pressure here. what i found very interesting is that they're preaching the idea for their subscribers two use alternate means to replace cbs, which was not available to them before. there is no immediate pressure on an upcoming football game. so all things put together, time is on the side of the distributor here, which isn't always the case. >> we do have a lot of earnings from the media companies. on tuesday discovery. wednesday is comcast, cbs, dreamworks, thursday time warner cable and directv. on friday viacom and cable vision. of those, write the one or two stocks you like the best? >> so, we actually have the preponderance of buy or strong

buy recommendations on the media sector. we do think that, you know, there is a lot of fundamental catalysts to kremd these stocks. a lot of them depend on the health of the television ecosystem which has never been stronger. in our view, you got the tail winds of retransmission consent. you know, content license and syndication. advertising revenues have been somewhat tentative. a lot of box office rebounded strongly second quarter after a soft q1, overall, with repretty pleased. i think there are a number of issues to see to drive the next phase of the rally, go imp the -- >> the stocks have come a long way. >> that's right. >> you like these stocks right now but when when i look at your 12 months price targets, for viocom, a 12 months price target lower than right now. same with directv. what does push things to the

next level? >> that is exactly right, becky. i think it sticks to valuations being a little overstretched. we will be re-visiting a lot of these data points as the companies begin to report. keep in mind the sect ohrt of the whole has been riding a whole new wave of consolidation, which has played a big role in the valuations you are seeing at the top of the historic ranges. the other thing i think that is worth noting is that, you know, the consolidation, itself, has really kind of been catalyzed by the announcements, a spin-off of cbs, time warner, news corp, i think they share the expectations, so dwlats we were a little cautious until we get the next data points. >> what's your favorite stock? >> so we have a buy on discovery, dreamworks, strong buy on disney, buy on time warner, time warner cable is a buy. directv as a whole for a variety

of reasons. so i think you get a sense na a lot of businesses are trading at all time highs. so that's why we think that at this point we were really going to be watching closely to see whether the second half bodes well for continues momentum that we have seen thus far. >> and if you really are looking at some of the big issues, i heard you say that you don't think either side in this fee dispute is going to push it because you seem to see the same thing that i have been kind of hearing, too, the industry really doesn't want washington involved. do you think that there's more of a chance or more of a threat at this point that washington could get involved with issues like these? >> well, i don't think that there is, there seals to be political will. mccain's bill on allah cart to unbundle cable channel got a co-sponsor. but i don't think the industry really wants to go in that direction. >> right, but does washington want to get involved? do you think there is more of an appetite than there has been in recent years? >> well, these kind of dispute,

time warner and cbs make the attention garner in terms of the legislation that's been under way. it seems like over the years, any time there is such a bill, it's a couple of head fix. i do believe there is an urgency for cable operators and the pay tv provider and content providers to reach an agreement. but, you know, you saw a similar situation with viacom and detect tv. ultimately the parties came to the table. that was the turnbling point whereby you began to believe there is a real risk here that it could be a signaled blackout. again, this is a new world order for retransmission consent. . that's what we have 18 over the last 12 to 18 months. >> thank you for joining us. >> my pleasure. thanks for having me. coming up, a jewel heist in cannes, france. we will bring you a live report. do you like cannes or cannes? >> i said it beth before. >> with your vigilantes. >> i think cannes.

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. >> $53 million worth of diamonds and jewelser stolen dwred from a luxury hotel in france. you know what i will do, whatever michelle ka zin ski,

crime reporter, i will say it like she does, she joins us now from this city in france. >> reporter: yeah, i swear i haven't seen those diamonds anywhere. but this happened in the legendary carlton hotel. up with of the most prestigious along this strip in cannes along the riviera on a sunday afternoon. now it's hard to tell what was more blindingly extraordinary, those diamonds or the heist of them? signs outside the carlton boldly announced summer exhibition of the mouth watery jules of leviev. maybe a little too effectively. because the thief was as bold. sunday before high noon, a man in a mask and hat simply walked into the hotel, allegedly used pistol to threaten staff and four guards while the glitry jules were set up for display and walked out with them. possibly $53 million worth gone.

>> diamond, anything in the world you can't resist. >> reporter: the carlton hotel was is the setting of the 1950s film "to catch a thief" an carry grant as a burglar and grace kelly first met her prince in real life. it still is the height of bejewelled glamour and this climb was clearly organized. >> he is the professional businessman and his business is jewel thiefry. >> reporter: there were two heists in cannes just in may during the film festival. in one case, a single necklace was worth more than $2 million. france has seen only one theft larger than this latest one. a harry winston store in paris in 2008. netting more than $100 million worth. some lighter found in a home and drain pipe in the suburbs. many believe, was the work of the notorious pink panther jewel thieves, thought to be spiblt responsible for hundreds of millions of robberies, including in the u.s. in the last three months, three

alleged members actually broke out of prison, one just last week. some suspect this is a sign the gang is back. so who was that masked man? were there more of them an how on earth did they get away? if police know at this point they're not saying. but experts are saying if bliss don't catch a thief like this in two hours, those jules are gone forever, cut down, resets rennedered untraceable. back to you guys. >> yeah. that's when you get ready to fence them. forgive me. we are going with you. it is cannes, i have the low down on this. you never say cannes, that's a derogatory word for women if france. >> really? >> it's not cannes, it's a cross between cannes and cannes. i got it now. >> very good. >> cannes. >> she's got i. right.

>> you are ready, come on down. we're all set. >> tough work for you, too, not to be mixed up with can can. thanks, michelle. >> can, cannes. >> can. >> still to come this morning, it is a big week for economic data. we've got gdp on wednesday and the employment report on friday, plus the fed kicks off a two-day policy meeting starting tomorrow. up next, we will tell you what to expect. plus we'll unveil the new all electric bmw i3. .

. >> the jobs report, the fed meet, what exec pect from the data and the fed. >> the hedge fund founder sounding the alarm on china. he has been warning about a coin bubble since 2010, he will tell us why his fund invests in fortress macro. >> bmw set to reveal its first electric car a. new look at the

first i3 as the first hour of "squawk box" begins right now. y you. >> welcome back to "squawk box." i'm joe kernen. our guest chief strategist at ubw wealth management and bob bharara, co-director of john hopkins' center for economics. we will have more. first, becky has your look at the headlines. >> we have been watching the u.s. equity futures. they have been weaker throughout the morning t. dow futures down 18 points. s&p off over 3 points. remember, we're coming off a week of modest advances, the dow was up 15 points. there is some more drama in michael dell's bid to take the computer company private as

well. he has taken issue with the vote requirement that counts as an abstention against a vote. counts as an against vote for proposals to take dove private. this morning the ante was up. carl icahn who proposes this dole issued another open letter to the dell special committee. he argues billions of dell shares have been traded based on the current rules t. higher bid should not allow him to change those voting rules. icahn writes the plain and simple fact is that michael dell and silver lake have overestimated the michael dell silver lake transaction. again, we have been watching everything that they have been saying about this. icahn has been very up in arms about this for some time. august 2nd is when we are expecting to see that second meeting for that. the special committee is going to be hearing more about this. but as you know, michael dell raised his bid last week. we will continue to hear more. joe. >> about a fifth of the s&p 500 companies are due to report

quarterly results this week. big oil, including bp, exxon and chevron will post results. out of the companies that reported so far. 68% boat estimates, 56% have beaten top line forecasts. we get a preview of tomorrow's big names coming out in pharma in just a couple minutes. we got american, pfizer both due out before the bell tomorrow. >> we also have a few deals to start this week. global ad agency google assist and omni con announcing a $31 billion tie out billed as a merger of equals. it could bring rival accounts like coke an pepsi under the same roof. speaking at a press conference in paris the ceos of the two companies pledged to hand him concerns from major clients. >> what is good in this operation in that we are both intering in that negotiation from a position of strength. there is no one weak partner and

there is no one who has deficiencies or anything of the like. so we believe this will be a great operation for all our people, our clients and our -- >> it's going to be delicate in its execution, be you the sooner we get onto it the better off we will be. >> both the ceos will join squawk in the street at 10:10 eastern the morning. in the pharma space, u.s. drug macroparigo is buying elan. before the announcement, elan rejected three hostile bids by investment firm. a third dole announced earlier this morning, lord and taylor owner hudson's bay will be buying retailer saks. that deal will be for $16 a share. it provides for a 40-day go shop period in which saks can seek

out other potential buyers. that stock up 3.6%, 15.87. . between second quarter gdp numbers, the jobs friday, it is going to be a lively week ahead for the marks. joining us right now, jennifer eric zorn, director of competitiveness and center of growth. neil irwin, the economics columnist at the washington post in washington, d.c. and, folks, thank you for both coming. jennifer, let's start talking a little about some of these numbers. you got the gdp number. the jobs numbers coming on friday, what are you locking forward with that? >> with jobs, i think we are looking for about more of the same. over the last few months, we have been seeing the economy adding 200,000 jobs, which it's good to see positive number, it hasn't been enough to move the unemployment rate beyond that 7.6%. >> we have the fomc meeting this week. really, people are starting to wonder, who is going to be the next fed chairman. for markets that are forward

focusing, that's a huge, huge question. what's wrong with larry summers? he has been attacked from so many angles since these trial balloons were floated by the administration what do you think of him? >> larry summers has a long career in public service. he's got a lot of experience and so there are people who are commenting on things he's done over a range of his time in different administrations. again, he has a depth of experience and the president has good qualified candidates to choose between. >> he's served through a lot of crises in the past. somebody with experience and somebody in his administration feels comfortable. >> i think that's true. so larry summers brings a lot to the table. a lot of people are pointing out other candidates who bring a lot to the table as well. >> let me count the ways, larry summers isn't qualified. don't you have a list of 20 things? isn't dean baker within of your guys? >> no, he's not. larry summers is a sfr fellow. >> oh.

oh. the left doesn't like larry right now? >> well, that's true for some. he also has many supporters on the left as well. again, he's been in public service a long time. >> you are preaching to the choir here him i'm with you. i thought you'd have a list that we could really get you going on why he shouldn't, deregulation, ceos, a citigroup consultant. he consorts with these evil bankers. there are so many reasons why center for american progress wouldn't like him. >> well, you know, he has been center for american progress recently, talking about the importance of diversity, economic growth. >> that would mean you need a woman. >> i will say janet yellen is incredibly well qualified. she has a lot of supporters across the board, too. i think the president has some really qualified experienced choices to pick from. >> neil, how about you? you have been watching this whole parlor game as well. where down we stand in terms of who the president is thinking

about who the next fed chairman should be? >> i think the president and the people around the president, very much like larry summers, many would like to see him get the job. i think they realized they want to turn down the volume and sort things out. they need to understand how much will the pull back be, how many senate votes? how tough a confirmation battle it will be. they don't want to get into a situation with problem and harry miers. you have a high profile nomination. so the question is then do you go with larry or unionet yell on or a third party, a roger furg zorn, think outside the box? you want to take a few months and sort that out maybe in september. >> go ahead. >> is there inability to turn the volume down, ho? isn't it tough when you got a ly important position that's now sort of, we don't know who will be in that position, can you turn the volume down? >> what they'll try and do have

have a vacuum and quiet things down. no, we will talk about this. i'm obsessed with this all of us who write and think about these things are paying attention to every little hint out of any official, anything anybody says, yes, not going the way -- >> it's also important from a market perspective, obviously. we are coming into a period the stew ward isn't going to be around, obviously, the next person in charge of maintaining or monitoring the situation or winding down this balance sheet, it's critically important. i think what is important is something jennifer pointed out, who would follow voelker, who would follow greenspan, it's been am an exist tential question. larry summers cut his teeth in the biggest crisis we faced. janet yellen has been there a long period of time, she's been the vice chairman along with bernanke. so this is a dynamic where you

have two very good choices as opposed to who can possibly -- >> neil, if you believe what you read, it's probably hyped. it's a clear difference. you've got yellen is portrayed as being, you know, even more helicopter bentish than bernanke in terms of dovishness, larry, they've got the latest comments that he made about the ineffectiveness in his view of qe. so are they stark differences there in the two? are we making more than there is about that? >> yeah, here's the thing. janet yellen, we know what her views are. she gives speeches at the time. we know how she votes. she maybe a little more dovish than bernanke. larry summers has been, he talks about all kind of economic issues. he does not talk about monetary policy. really, that report from last week on his comments on qe, they were limited. they weren't, you know, he is not out there every day saying here's what i think. >> down it matters there hasn't

been a trial balloon? i know the obama administration likes summers. he has been really loyal. >> they probably liked it. probably would be the preference. they haven't had a trial balloon about yellen. is she the favorite right now? >> i don't think it's prohibitive at ul all that she gets the job. >> there is another thing, too, we can listen to what the president said. what is important he makes this critical decision as someone who understands the dual mandate of the fed. we spend a lot of time talking about inflation t. president made it clear he wants someone in the job who will be thinking about what it means to maximize unemployment. >> he doesn't need to be. he doesn't need someone that takes the place of the fiscal. larry is certainly, i mean, the paper as we talked about before the paper that he gave with brad delong about a year ago talked about how fiscal policy would be even more stimulative.

to characterize him as hawkish. he was saying i want to go for the whole enchilada. if you are at the fed, the fiscal margin is tightening. >> you would say yellen is even more dovish than him, right? no? >> i think you have to be careful. i think so. >> so you think larry as a total -- >> don't. has there been any inflation? no. the unemployment rate is still high. >> yes, is participation low, yes? are you supposed to have your foot on the gas pedal, i think they both would agree, yes. >> jennifer, do you think there is an effectiveness to the quantitative easing. >> there is a limit to any one instrument. i think what we are seeing from the fed is the fed taking strong action because congress left the playing field. we seen the fiscal tienting. we will see more when the second quarter gdp numbers come out. i think the fed will keep doing what it thinks it needs to do, congress is not being very

focused on growth. >> actually, there was an interesting piece in the "journal" this morning. if you look at the deficit and the fact that we are cutting back now. we are cutting back on the quarterly funding. so it is, in effect, in europe, everybody tried aggressive us a territory. they still have really big deficit problems. we actually look better having gone for growth. better on the deficit side. >> that's true the one thing i want to say, especially as we look toward these q2 numbers is the united states is toying with us a territory numbers in terms of sequester. it is no surprise economists are looking for a tightening in q 2 because the united states is starting to dabble. >> we did dabble. >> so i think that's important. you are right the united states did a lot of things right in terms of the stimulus, focusing on growth t. question is, what are we going to do now with still about 12 million americans unemployed? >> it said in the fiscal policy the answer is nothing.

>> i like all the gossip, neil, where is valerie on this? valerie and christine romer were tight. romer had a lot of run-ins with summers. is that how it works? >> it is very clear, so the kind of reubenites. >> jason furman the cea, black lew -- geithner, they're kind of the summers people we believe. now all this is reading between the lines, that sort of thing. some say they are more likely not to like the appearance of this bull headish guy. >> woman. we need a woman. therefore gender concerns here, too. would be a feather in his cap to make a woman the first fed chairman. >> since it's the voice of the white house. they want that impression as well. >> this is good stuff. this is good. he said it won't be for months. so we are going to milk this. leave your phone number. neil, you, too.

>> the king is dead. the king is dead, i'm get back to you. >> i don't know who it will be. coming up, two major pharma companies, up next, we have a preview from merck and fierz. then at 78:30, fej hedge fund patrick wolf will talk to us. a chess grand matter. a 9-year-old girl. anyway, that's not him. blindfolded. happen in a second. with fidelity's guaranteed one-second trade execution, .r

>> american pfizer out with earnings, joining us with a review, barbara ryan managing director of fdi consulting. your point is any given quarter for these guys is not nearly as important as what all these companies have had to do, that is navigate patent clips, specifically the two that come tomorrow? >> yes, interestingly, merck and pfizer had more challenges and were the two that did the biggest deechlts obviously that allowed them to really weather the storm and manage through the earnings clip. obviously, lipitor and skinkular

have come down with assault of generic competition. but both companies have continued to deliver earnings at a fairly stable level. i think what is also important, that came from the synergy an savings from that consolidation. but the other piece is i think both companies have aggressively returned cash to shareholders, which also has helped their stocks. so these companies return probably 75% of their free cash flow to shareholders in purchase and dividends. pfizer has dramatically increased its payout ratio after it was forced to obviously cut the dividend and pfizer has been very aggressive in restructuring its assets. so it successfully spun off zoetis. it's an malhealth business and sold its nutritional business for $11 billion and took the net proceeds and bought their stock. >> the glory days. neither one have gotten back to those late '90s. >> you know, clearly, i think we

are seeing innovation return in the business. i think that's what we're seeing driving all the biotech stocks an driving mna, a hos till bid for onyx. >> they should be ought the cutting edge of science. it takes a while. >> if you look at asco, there was a tremendous amount of enthusiasm. right, mevg, phizer -- merck, pfizer, they are leading the charge. >> when do we see the new stock respond? >> i think we have begun to see that. the first leg was restructuring. they didn't fall off the cliff. things weren't as bad as they thought. go imp the poor economy, they sucked less than everything else through that period of time. but i think the multiple expansion we are seeing in the group is clearly a function of the market believing that there is an encore to the r & d

pipelines, certainly the growth trajectory isn't going to be what you see in the smaller company. nonetheless, i think the market is saying they do see light at the end of the title. >> the r & d pipeline, we know it has left less than in the past. you talked about biotechnology being probably the hottest space right now. is this going, down this could drive? they have cash to return to shareholders? how much will target them, do you think? >> i think mna will continue to be a major factor as will be partnerships and licensing aagreement. i think we see all of those things. i certainly do think that however one has to take pause given the rise in the biotech sector at this point and we'll see this play out with amgen's $120 billion bid for onyx which

is trading north of 130 and there are other companies, including supposedly companies like pfizer and novaris locking at that. but i think the business will continue to be inquisitive. we seen that at the hcb space, both gilead and bristol. bristol, unfortunately, acquiring inhi be itx that product sort of failing. >> really, we're not up to speed as much as are you on a lot of these things. is there anything in the affordable care act that we haven't already taken into account? i would think that maybe some people call eight fallacy arrangement in that pharma made with a boum care. they took care of themself, didn't they? they sort of defanged -- >> i remember at the time the ceo of merck saying to me, dick clark, which i thought was a great line. he said, you know, you were either at the table or on the

menu. i think that's pharma very much acknowledged this was going to happen. what could we live with, what could we not live with? they made their deal. that i have discounts to the government. they pay a fee of 2% of u.s. revenues into funding obamacare. at the end of the day, theoretically, there will be induced demand as all the uninsured are enrolled in coverage. however, they preserve the integrity of their patents and they preserve the integrity of being able to price their products. >> will innovation be, i mean, what there has been soond it's a frustrated given that we sequence the entire genome, it seems we could be going a little more quickly to do some of these things. will innovation be affected positively or negatively or is it a fet neutral? >> well, i think, overall, i think we'd have to say that innovation, you know, has certainly been enhanced.

i would say that because if you look at the innovative products being launched in the market. whether they be for rare diseases or for oncology, those products are getting rewarded with big fat priceing thes around the world and they're joined, you know, great success. you look at biogen and tech verdara, their new multiple sclerosis drug, it had a launch in the last quarter. so i think innovation is being supported and, hopefully that, will continue. >> okay. so i remember the days when merck was just a dividend stock. we're beyond that. but would you buy pfizer or merck? >> phizer i think, you know, clearly, has the most levers for the marketplace and i think -- >> for tomorrow. >> and, you know, then merck is sort of the down an out. that's sort of the, you know,

the dog of the group, if you will. it's been the most undervalued. i do think that merck's pipeline is probably too heavily discounted and i think we will see some good news. they also hired a new research director who came. he was at merck, when to the amgen 12 years, now back at. >> great, barbara, thank you. >> thank you for having me. >> when we come back, gran master exam's patrick wolff has been warning of a bubble for three years now. he will join us at 8:30 eastern. at the bottom of the hour, bmw's ceo will unveil the first electric car unveiled. "squawk box" will be right back. weekdays are for rising to the challenge. they're the days to take care of business.

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onnicyx good morning monday morning. politicos is reporting wells fargo halted sales of unpaid consumer loans to outside debt collection agencies. reichal bank's j.p. morgan has frozen most of its credit card debts. when we come back on "squawk box," we will be talking china, the u.s. economy and investment ideas with patrick wolff. he has been warning of a bubble in china since 2010. "squawk box" will be right back. [ male announcer ] it's time.

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. >> welcome back, everybody, let's take a look at some sox in the news this morning. irish drug maker milan is being

bought by perigo. elan had been shopping for buyers after rejecting a hostile takeover bid from royalty pharma. omni com will be combining to form the world's biggest advertising firm. the combined company will be worth about $35 billion. they are expected to pay a great deal of scrutiny. carl icahn firing off another criticism at dell. he is criticizing founder michael dell for changing the voting rules involving dell and silver lake partners. they say any vote not cast counts as a vote against dell. yeah, dell and silver lake want to change that provision. >> fears of a bubble in china are growing. here is jim chan os earlier this month at cnbc's delivering alpha conference. >> the marks have done nothing but go up globally in four years. with one exception, basically,

china. and the credit cycle that we saw, which we thought would happen first if real estate has not happened. real estate has held up, which is the interesting thing about china. i think it's the next shoe to drop. >> joining us now from san francisco is patrick wolff, founding manager of grand marshall capital. the fund was up 43% in june. she former manager and grand master of chess. once you are a grand master, patrick, have you that for life? >> that's right. it doesn't matter how bad your game gets afterwards. >> did you ever play road golf? >> actually, we played ten, yefl years ago, if i remember correctly. >> who won? >> we chatted. nice guy. >> we have him on set. sometimes you look over at him, he's looking around and i've got him to admit he was thinkingant like chess moves.

while he's sitting here. >> once you got the bug, it's hard to get rid of it. >> when i'm like that liepg i like in sling blade with me, it's food, usually bacon, foofd, something like that. in there well, you have to take up chess. >> more french friechls i tell you, what's interesting. i like your three scenarios. you bought the the base xas for china the bear case, they're all bad. i don't think that's consensus right now, patrick. consensus i really believe is soft landing and back to something that the rest of the world still really likes. >> i agree with that. i think that's totally misguided. i think, well, so to elaborate on those scenarios, in a base case scenario, i think you get severe recession and financial crisis in china. i think that should be the base case scenario. if i were the ceo of caterpillar. if i were secretary of state john kerry, that would be my base case scenario for china. >> severe recession, financial

crisis? >> yeah. >> awesome, wow. okay. >> well, i think that's what you are seeing. a bear case scenario is the same thing only worse and then you get massive capital and political instable. maybe something like tiananmen square will work. >> it hits the fan. would affect the entire globe? >> well, it's unclear how much it would affect the entire globe. i think without question a base case scenario will be bad for emerging markets. if you seen, jim chan os is a very smart guy. i agree gree with a lot of what he said. i disagree with what he said about stockmarkets over the last four years. look at board of trade, for example, the lot of the commodity driven markets have not been doing well. it's been western marks have have been more removed, of course, the united states has been the star performing. >> then your full case, you get a recession, but it actually, in china. >> yeah. >> but there is something good that comes from it. there is some structural reform. >> this i think is the key,

right? people look at china. by the way, i have no idea what china is growing at. as far as i know, china may not be growing at this point. the current chinese premier has been quoted in wikileaks is saying he doesn't believe the gdp numbers. people should forgive the gdp numbers. >> one interesting what i to try to characterize that, if you take the top ten trading partners with coin and you add up their exports to china, then you've got data that the chinese government doesn't get to put their hands on, if you look at that data what you actually got is about minus 4% year over year. so according to an outside view of what's going on in china, it's that. >> minus 4%? >> yeah. yeah. if you add up, you know the top ten exporters to china. it's minus 4, year over year. >> people really need to just get out of their mind the anchoring effect of hearing these numbers out of china that are meaningless, but to get back

to the notion of a bull case scenario, i think the real question in china is can they hold the system together and enact wrenching structural reforms? now, i think those structural reforms could be, would normally be very painful. i think there is no reason it wouldn't be painful for china over the next few years. but if are you able do it, then you might have a 44, more open, more capitalistic economy that would be better able grow once you go through those changes. i hope that's what happens. i'm not opt mick about it. but i think that should be your bull case scenario. i think in any case, china is in for rough sledding. i agree with you, joe, i don't think people -- i don't think the consensus view is taking into account robs. >> don't count chosen out. there has been a lot of people that have been there. there have been a lot of china enablers. tell us something yesterday, a one sentence edict from whoever

is in charge over there, they want to look at everything the government owes. they want all the local places to get together and they want some type of reporting back to their central authority of how much they owe. did you see that? and what does that mean? they have no idea where capital is deployed at this point, do they? >> i think that's right. look, joe, let me ask you a simple rhetorical question. if president obama were to get in front of the nation and say, look with ve a growth problem in the united states, so what my government is going to do from henceforth is mandate a minimum 5% real gdp growth rate. will fix our problem. would you be optimistic? >> i think he is trying to do that with his infrastructure, isn't he? >> come on. seriously. what china has is nothing like what we have in a normal capitalistic economy. >> that's because you have a republican congress. >> the point i'm making is coin has very much a command economy

at the top level. >> right. is calling. all right. you are right. it's a matter of degree, but there's a little bit of central planning infrastructure, clone energy, that kind of stuff n. china, it's to a whole new level. it has caused a huge misallocation of capital that we all thought would come home to roost. they all say china knows how to do it. >> you know, anything that can't go on forever will eventually stop. these kind of investment bubbles, the longer they go on, the harder they tend to fall. i think that's why a number of us, you know, think that china is in for a big fall. i hope they can manage their problems. i think the base case scenario ought to be that it's going to be more than a hard landing. something worse. >> if you lock back at the great recession for the u.s. and europe, so demand collapses for a lot of chinese products. a lot of us thought at that juncture china would discover what it's like if you are tied to the global business cycle. instead, they postpone that

inevitable, right? they've created this wild infrastructure become for two years, one could make the case that that postponement actually spread out the full hit of the great recession and they're in the midst of it now. >> i think there is really something to that. one thing i would emphasize is, if you actually sit down and look at the finances a lot of these chinese companies, particularly the ones that trade in hong kong as we have done at grand master. what is striking is they may report accounting profit. they're not making money. there is a reason why shibor keeps lurching upwards is because the banks don't have capital. i don't have capital because they're not getting paid back on their loans. they aren't getting paid back on loans because the companies aren't making money t. working capitals have ballooned to an extraordinarily level. people aren't paying each other's bills. people have suffering an eform

us cpap exxon assets not returning cash. this is the problem large for the chinese economy. >> can i split one hair with you? >> we got to go. >> you've got an enormous amount of exchanges reserves, typically the giant crisis for developing economies is when they have a run open their currency that. piece they don't have to worry about. >> absolutely. coin cannot have an external funding crisis. china can have an internal funding crisis and that's why i say the capital flight, nobody knows a lot of the gaming that goes on is basically a back door for rich keenese to try to get the money out t. chinese government in my opinion may be appreciating steadily even though exports get weaker and weaker. precisely because they want to provide an incentive for people to keep their money on shore. >> did you think about a chess move at all through this interview at all? >> i have been so captivated by what you were saying, i couldn't think of anything else.

>> that's nice. >> victory! >> do you like to play white or which would you rather be, patrick, white or black. >>? i'd rather face a weaker position with a position. >> which is stronger the white or black? zblits always noise to have the same move. >> do you always move the same pawn, have you ever moved a knight first? >> i have once or twice. i favored the king's pawn. >> the kings pawn up to 4? >> exactly right. >> very good. i am going to play you. i know you think you are tough. come back here and guest host, we'll see how tough you are. >> all right. sounds good. >> yeah. >> he's afraid. >> when we come back, it's a big week for jobs. we got the adp private payrolls on wednesday, thursday the weekly claims, then the friday july employment report. up next, we talk about two big hiroshima announcements out this morning. plus we talk to the ceo of bmw.

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when you open an account. . >> welcome back to "squawk box" the futures have been weaker. right now the dow futures down 20 points. s&p futures off 3.5. in our headlines this morning, amazon is unveiling a new hiring spree saying it is locking to fill 500 full time jobs at 17

fulfillment centers across the country. president obama will visit a warehouse in chattanooga, tennessee tomorrow. toyota will be adding 200 jobs at a manufacturing plant in indiana t. new hires will boost production of toyota's highlander, mid-size suv. coming up, bmw will unveil its first all electric car. a look at the i3 and the interview of the ceo of bmw is here. >> yeah. >> jim cramer will join us to set up a busy week of earnings and economic data. [ music playing ] peace of mind is important when you're running a successful business. so we provide it services you can rely on. with centurylink as your trusted it partner, you'll experience reliable uptime for the network and services you depend on.

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. >> welcome back, everybody, let's get down to the new york stock exchange, jim cramer is standing byment jim, while we have you for a quick preview. i guess the omnicom deal is getting a lot of attention. what do you think of the whole idea of bigger being better. >> i don't think it's that tough time getting through.

i would say all this is supposed to be against google. come on, google has programattic selling. in other words, if you want to be all over the place, you give money to google. they place you everywhere. this omnicom pub liss sith -- pub liss publicist. if anybody offline is going to defeat google, it doesn't happen. there were great quotes in new york times saying listen this is not the way people are advertising on the web. i don't think that will change anything. >> all right. so, we'll continue to keep an eye on that. also, you have more conversations coming out from carl dell. this letter that he's put out. this open letter to the special committee at dell. i mean, this one keeps getting more and more interesting. i noticed the stock trading below $13. so are these people writing this off not thinking michael dell's offer is going to get accepted?

>> i think dell in a very pointed interview said, look, viacom was a total -- if they win, i'm out of there. if he doesn't, i'll feel like you think you're going to win the election? i think that this is an another one where you just sell. there's very little upside. i don't know why people are fooling around with this. it's a pc company in the end those are all doing terrible. >> the other thing we've been trying to figure out, what to make of the news we're expecting this week. the fed with the two-day meeting, gdp numbers coming out, big jobs number friday, and, jim, i'm trying to figure out if the market wants good news or still looking for mediocre news to hope the fed stays in there? what do you think? >> i think the market's split. most of the financial -- of the housing and the financials related to mortgages want to see all weak data. all of this money going into the industrials, going into the

airspace, into the new trade, they want to see better numbers because, though it may mean a pseudotightening, the world's getting better and those companies need the world to be better. >> excellent analysis. thank you. we'll see you in a few minutes. >> thank you. coming up, a look at that new beamer, the ceo of bmw will join us, unveil the new bmw i3, the first all electric car. (announcer) scottrade knows our clients trade

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entering the all electric auto sales. bmw hosting unveiling of the i3. bmw sent us one and we're going to keep it and we're uncovering it right now. phil lebeau joins us, first on cnbc interview. >> thank you, joe. joined by dr. norbert reithofer, ceo of bmw with the i3 behind us here. and we were talking before, you believe that this is spot-on for why you think it will be successful and attract buyers, explain. >> in short, this is revolutionary and i have to say, it's fun to drive.

it is a real bmw. and you can really say it is an ultimate driving machine. but what are the special things? highlights of the car? i mean, it's made of carbon fiber. the passenger cell. the shasy is made of aluminum. it's a lightweight construction, what is important for electric vehicle. and these are the things why we think it will be an outstanding car. >> you're el aselling this worldwide, what you'll see in china, in europe. the at $43,350 in the united states a number of people questioning whether or not is there enough of a market in that $40,000 range? i know there are incentives from the federal government. what do you say to that? >> especially the u.s. market, in my opinion, an important one. if you see the first quarter of 2013, i mean, the growth rate was 135% for battery electric

vehicles and that is a very promising figure for us. and if you see the road market, last year, 93,000 electric vehicles. this year, can be around 150,000 electric vehicles. i think very promising figures. >> when you look at the global market, not just for the i3, but for bmw, and the luxury market overall, and where are you seeing the strength? north america and china or recovery in europe as well. >> europe is a real challenge for bmw but in my opinion for other car companies as well. i mean, we think the market will decline by 5% in the 2013 in europe. and that means for all of us it will remain a challenge. if i see the u.s. as a market, i mean, our growth rate in the first half was 8.9%, more than 1

1 170,000 vehicles. group sales figure, china, first half 15%. more than 180,000 vehicles. and a promising market is russia as well for us. growth rate 15% in the first half and a lot of other markets, turkey, for example, south korea, japan, australia. >> will bmw be number one at then of the year for the luxury market in the united states? >> yes. >> emphatically, no question? >> we will fight for it. we will go for it. >> dr. norbert reithofer, ceo of bmw. tell everybody, what happened to you driving the i3 this weekend? >> i'm in -- i had an audi behind me. >> what happened to the audi? >> i accelerated the car and for me, it was a lot of fun to look into the rear mirror and to see the other car was disappearing. >> audi, that's enjoyable from your vantage point? >> as ceo of bmw. >> absolutely. absolutely. guys, that's the i3 from here in

manhattan. back to you. >> thank you. let's get back to your best host for the last word. guys, one of the questions we've heard over and over on the show, where does the next rally for stocks originate? mike you brought up a good point earlier talking offcamera. you think it's in household creation? >> i do think. we've got this period where we've got pent-up demand. household information was a -- now it's house prices starting to rise and we're starting to see more affordability in terms of credit avail ability. that can drive a lot of areas. it's also something that portends for the cyclical sectors of the equity markets going forward. >> not just housing but you talked about this looking at the cable companies and the entertainment companies? >> again, it's not just about housing. in fact, no longer primarily in housing. it's all inform the things that go in when you buy and furnish a house. >> bob, when you look around at the markets? >> we've had a fear of failure of a recession or a depression

or double dip or lost decade for five years. so i have a very tough time imagining how good news could really be bad news for any length of time for the equity market. i think if the news is good in fact, it's positive for equities, even if it gives you a hiccup in bonds. >> also that's how he explains why we're still so, you know, unimpressed by what's a huge move in the stock market. nobody's excited really at this point. >> this is the hated since you and i were working in 19 early '80s at e.f. hutton, i've never seen a market go up like this new york fanfare, no enthusiasm. >> let's not talk about it. >> bob, mike, gentlemen, thank you both for coming in today. appreciate your time. >> great to be here. >> thank you, joe. >> you'll head back to the poconos or -- >> i'll head back to the poconos. >> when back down to -- >> i'm teaching the intro macro

class, first week of september that will be fun. >> are you an academic or real world guy now. >> i like to think i'm both. >> michael, i already said to you, you know you've got all of the money the ubs. be careful, think about all of this stuff. join us tomorrow. "squawk on the street" is next. it is all about the "mad men" theme with a blockbuster merger in the world of advertising. welcome to "squawk on the street." i'm carl quintanilla. jim cramer. three big deals not lighting a spark under futures, that's due in part to japan, down 3% overnight. a four-week low as we kick off a big week of earnings, the fed